Today, the Obama Administration has launched a new trade enforcement action against the People’s Republic of China at the World Trade Organization (WTO) concerning excessive government support provided for Chinese production of rice, wheat, and corn. [Admin. officials joined] by bipartisan members of Congress in announcing the complaint which challenges China’s use of “market price support” for three key crops (rice, wheat, and corn) in excess of China’s commitments under WTO rules.

The U.S. government also subsidizes US farmers growing and exporting rice, wheat, and corn. Comparing farm subsidies across countries is complex. Iowa plays a key role in each Presidential election cycle because of the early caucuses lead other state primaries. And because corn is big business in Iowa, Presidential candidates usually call for maintaining corn and ethanol subsidies in their Iowa campaign stops.

In 2015 Iowa farmers exported $1.4 billion in corn and other agricultural goods to China and Iowa exports have increased 257% since 2006.

Crop prices fell in 2016 and Reuters reports “USDA to pay farmers more than $7 billion due to low crop prices,” (October 4, 2016). Though USDA and farm groups argue the federal insurance subsidies help provide just a “safety net” for farmers when prices fall, they encourage farmers to expand production, since they can expect to make money whether prices at harvest time are high or low (selling at market prices or at government-subsidized insured prices).

U.S. agricultural exports to China have grown more than 200 percent over the past decade and China was the United States’ second-largest international market in 2015. U.S. farm and food exports to China totaled more than $20.2 billion in 2015, led by soybeans, coarse grains, distillers’ grains, hides and skins, and cotton.

So… what if both the US government and the Chinese government worked together to reduce or eliminate subsidies to farmers. US subsidies allow farmers to export corn, wheat, and other subsidized crops to other countries at artificially low prices. Subsidies also cost domestic taxpayers billions, and the money mostly goes to wealthy farmers. Chinese government farm subsidies similarly distort world markets and cost Chinese taxpayers billions.

US relations with China may be most influenced by Terry Branstad, the Trump Administration’s USDA nominee. According to the Des Moines Register (December 10, 2016):

Iowa’s long-serving governor earned selection as U.S. ambassador to China by virtue of his long-standing personal ties to Chinese President Xi Jinping, which stretch back three decades. But how far does friendship go in managing relations between the world’s two most powerful countries? Branstad will soon find out in his new role.

Though the Des Moines Register mostly discusses US/China geopolitical issues and the long personal relationship between Terry Branstad and Chinese President Xi Jinping, reducing and reforming farm subsidies would help rationalize commodity farm production in US and China, reduce environmental harms, and reduce financial burdens to taxpayers in both countries.

Agricultural subsidies distort market prices and interfere with trade, causing deleterious distortions that adversely affect poor famers in developing countries and burden U.S. taxpayers. Moreover, in some cases agricultural subsidies can lead to environmental degradation. Reducing agricultural subsidies has the potential to help developing countries, the environment and taxpayers.